TaxTMI 
TaxTMI 
2016 (7) TMI 1440
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....assessee per its appeal are as under:- "1. For that in view of the facts and circumstances of the case, the Ld. CIT(A) was wholly wrong and unjustified in holding the assessment order u/s 143(3) dt. 31.12.2009 as legal and valid on the alleged ground that the notice u/s 143(2) dt. 02.09.2009 issued by ITO. Ward - 3(1), Kolkata, holding jurisdiction and access over the e-return filed for relevant A.Y 2007-08 was legal and valid. The decision of the Ld. CIT(A) was wholly unreasonable, uncalled for and bad in law as the ITO, Ward-3(1) had no legal jurisdiction vested with him to commence the assessment proceeding and complete it U/S 143(3) in this case by issue of a notice U/S 143(2) of the Act. 2. For that in view of the facts and circumstances of the case, the Ld. CIT(A) was wholly wrong and unjustified in holding the impugned order U/S 143(3) dt. 31.12.2009 passed by the LT.O, Ward - 56(4), Kol, as legal and valid, without considering the facts that the mandatory notice U/S 143(2) of the Act for the A.Y 2007-08 was never issued and served either by the said jurisdictional ITO prior to making the assessment or by the earlier A.O i.e. DCTT, CC-XI, Kol, at any time s....
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....ng and unjustified in confirming the AO's action in rejecting the assessee's claim of Long Term Capital Loss of Rs. 39,54,0001- suffered on sale of the said house property without considering the facts that as per the said old agreement dt. 06.01.1975 between the assessee and the erstwhile owner M/s Murray & Co. Pvt. Ltd., duly authenticated and registered by a Notary, the assessee firm became the deemed owner of the property u/s 2(47)(v) of the I.Tax Act and accordingly the gain 1 loss on sale of the property is assessable under the head " Capital Gain" in the hands of the assessee firm as the property was sold by the erstwhile owner for and on behalf of the assessee. The unlawful decisions of both the AO and the Ld. CIT(A) were wholly unreasonable, uncalled for and bad in law. 7. For that in view of the facts and circumstances of the case, the Ld. CIT(A) was wholly wrong and unjustified in confirming the disallowance of the Long Term Capital Loss of Rs. 16,12,812/- on sale of shares on the alleged grounds that it was a book loss generated through circular transactions among the Group concerns by passing adjustment entries in the books of a/c without cons....
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....time a notice u/s 143(2) was issued and served by ITO Ward-3(1) on dated 02.09.2009. The same was challenged by assessee on the ground that jurisdiction was not lying with the ITO Ward-3(1) and therefore notice issued is not a valid notice. The copy of the notice issued under section 143(2) is placed on page 30 of the paper book and letter for challenging the notice is placed on page 31 of the paper book. Thereafter notice was issued u/s 142(1) of the Act dated 06.11.2009 by ITO Ward-56(4) having jurisdiction over the assessee which is placed on page 32-33 of the paper book. The assessee has also objected the legality of the notice issued under section 142(1) of the Act before the AO of ward 56(4) vide its letter dated 16-11-2009 which is placed on page 81 of the paper book on the ground that no valid notice u/s. 143(2) was issued by ITO Ward-56(4). However the assessment was completed by the ITO Ward-56(4) at total income of Rs. 14,63,85,655.00 after making certain addition/ disallowance. 6. Aggrieved, assessee preferred an appeal to ld. CIT(A) and raised objection on the validity of assessment proceedings. The Ld. CIT(A) in turn called for remand report from the AO which is pl....
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....7- 08 for making the scrutiny assessment, but it was never complied by the jurisdictional ITO Ward- 56(4) or his predecessor. In this regard, the attention is invited to the relevant provisions of section 143(2) of the Income-tax Act, 1961, which reads as under: "143(2) Where a return has been furnished under section 139, or in response to a notice under sub-section(1) of section 142, the Assessing officer shall (i) where he has reason to believe that any claim of loss, exemption, deduction, allowance or relief made in the return is inadmissible, serve on the assessee a notice specifying particulars of such claim of loss, exemption, deduction, allowance or relief and require him, on a date to be specified therein to produce, or cause to be produced, any evidence or particulars specified therein or on which the assessee may rely, in support of such claim; (Provided that no notice under this clause shall be served on the assessee on or after the 1st day of June, 2003) (ii) notwithstanding anything contained in clause (1), if he considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessi....
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....on by virtue of directions or orders issued under sub-section (1) or sub- section (2) of section 120 or any other provision of this Act, and the Additional Commissioner or Additional Director or Joint Commissioner or Joint Director who is directed under clause (b) of sub-section (4) of that section to exercise or perform all or any of the powers and functions conferred on, or assigned to, an Assessing Officer under this Act." As apparent from above, the Assessing Officer in relation to an assessee means the AO, who is entrusted with the relevant jurisdiction as per the directions issued in this regard. There is no denying fact that the jurisdiction of the appellant was with DCIT, Central Circle till 06/04/2009. Return of income was filed on 17/01/2009 with Central Circle AO. Again, there is no denying the fact that the jurisdiction was transferred to ITO, Ward- 56(4), pursuant to the transfer order dated 06/04/2009. This is also a fact that both the AO's have never issued any notice u/s.143(2) within the prescribed period of six months from the end of the financial year in which the return was filed. In the present case, the ITO, Ward 3(1), having no jurisdiction over ....
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....assessee. Therefore, in our considered view, issuance of notice under s. 142(1) itself is without jurisdiction. The ITO-(HQ) CIB, Pune, has completed the assessment under s. 144 even without issuing statutory notice under s. 143(2), which is mandatory for allowing opportunity of being heard to the assessee for completion of assessment under s. 143(3) or under s. 144. No such notice has been issued; therefore, for this reason also the assessment so completed by the ITO-(HQ) CIB, Pune, is null and void; therefore, liable to be quashed. 10. It is a matter of fact that the areas of jurisdiction of the AO are earmarked and as per area / earmarked, the assessees who belong to that area files their return with their respective ITOs. As no area has been earmarked to the ITO-(HQ) CIB, Pune, for completion of assessment, therefore, the ITO-(HQ) CIB, Pune, is not having jurisdiction to pass any assessment order. In view of these facts and circumstances, we hold that the order passed under s. 144 is bad in law and therefore, we quash the assessment. 11. Since we have allowed the legal issue in favour of the assessee, therefore, the issue on merit has become academic in nature....
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.... Storage Private Limited [2015J 228 Taxman 48 (Mag.) (Allahabad), the Hon'ble Allahabad High Court has held that, "where there is a failure apparent to issue a notice under section 143(2) within prescribed period, it cannot be cured by taking recourse to section 292BB of the Income Tax Act 1961". More so, at this juncture, reference is invited to the decision of the Hon'ble Kolkata Tribunal in the , case of M/s. Nemchand Jain & Sons vs. DCIT, ITA No.1874/Kol/2012, [order copy enclosed at page nos. 60-65 of the P/B] wherein it was held that, "as the notice has been served beyond the specified period of twelve months, respectfully following the decision of the hon 'ble Gujarat High Court in the case of Maxima Systems Ltd. as also the decision of the Hon 'ble jurisdictional \ High Court of alcutta in the case of Amal Kumar Ghosh, the notice issued under section 143(2) 'Is held to be invalid and the consequential assessment also as invalid." 7.2 Apart from the above, it would not be out of place to mention here that even the provisions of section 292BB will not come to the rescue of the AO for failure to serve valid notice u/s 143(2) of the Act. In this ....
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.... STATE OF KERALA [1966]60 ITR 262 (SC) observed as under: "If the present issue is considered in the light 0/ the above decision 0/ Hon'ble Supreme Court, then, it has to be held that s.292BB is applicable to asst. yr. 2008-09 and subsequent years. Therefore, answer to the second aspect of the question is that assessee is precluded from taking such objection/or and from asst. yr. 2008-09. 45. Summarising our findings, we hold as follows: (i) Sec. 292BB even if it is procedural it is creating a new disability as it precludes the assessee from taking a plea which could be taken as a right, cannot be construed retrospectively as the same is made applicable by the statute w.e.j. 1st April, 2008. (ii) Sec. 292BB is applicable to the asst. yr. 2008-09 and subsequent assessment years. " Again, even otherwise also, in view of the objection filed by the appellant before ITO, Ward- 56(4), vide letter dated 16/11/2009 [copy of which is enclosed at page no. 81 of the P/b], against issuing of notice u/s 142(1) without valid service of notice u/s 143(2), the aforementioned provision will have no application in the case of the appellant in terms of....
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....y issued by ITO, Ward- 3(1) who was holding the PAN at the time of selection of case through CASS, is also having no basis. This is because it is clear from the above-referred transfer order that the jurisdiction of the appellant never vested with ITO, Ward 3(1), even before the order of transfer or at any time thereafter. There is no doubt that the jurisdiction of the appellant as per PAN was with DCIT, CC-XI, Kolkata, till the point of transfer to ITO, Ward -56(4). Therefore, on what basis the AO claimed that previous jurisdiction of the appellant vested with ITO, Ward - 3(1), is known best to the AO himself, especially in view of the fact that no reply was given by ITO, Ward - 3(1) when the appellant at the very outset challenged the issue of notice u/s 143(2) by the AO, ITO, Ward - 3(1), vide letter dated 01/10/2009. Further, it is relevant to note here that CASS, on which reliance has been placed by the AO in support of the issue of notice u/s.l43(2), has not been authorized under any provisions of the Income Tax Act to determine the jurisdiction in respect of any assessee nor it has been authorized under the IT Act to direct anybody, other than the AO having proper jurisdicti....
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....ority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross- examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them." 7.4 Finally, when the Ld.CIT itself in his appellate order dated 07/0912011 has acknowledged the fact that at the time of filing of return, the DCIT, CC-XI, Kolkata, was the jurisdictional Assessing Officer and that subsequent to the transfer order passed u/s.127 of the Act by the Ld.CIT, Central-I, Kolkata, on 06/04/2009, the jurisdiction of the appellant was transferred to ITO, Ward - 56(4), there remains no iota of doubt that indeed ITO, Ward - 3(1) was not the previous AO of the appellant, as claimed by the Department. Relevant portion of the order, copy of which is enclosed at page nos. 102-128 of the P/b, is reproduced hereunder: "It appears from the record th....
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....bmitted that ITO Ward-3(1) is a Corporate Ward where only returns of corporate can be filed and processed. So in support of its claim Ld. AR submitted the list of Words having jurisdiction over different assessee which are placed on pages 91 to 94 of the Paper Book. 8. We have heard the rival parties and perused the materials available on record. From the foregoing discussion, we find that assessee has been filing its income tax return with DCIT Circle-XI in the earlier years including for the year under consideration. Thereafter the case was transferred to ITO Ward 56(4) by the order of Commissioner of Income Tax passed u/s 127 of the Act. However for the year under consideration a notice under section 143(2) of the Act was issued by the ITO of ward 3(1) for scrutiny assessment. The assessee challenged the validity of the notice on the ground that the jurisdiction on the assessee vests with the ITO of ward 56(4). On bringing this anomaly to the notice of the income tax authorities, the lower authorities rejected the same and framed the assessment u/s 143(3) of the Act by observing that the e-return was filed and the case was selected for selected on the basis of CASS s....
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....abundantly clear that a reassessment order cannot be passed without compliance with the mandatory requirement of notice being issued by the AO to the Assessee under Section 143(2) of the Act, the ITAT was in the present case right in concluding that the reassessment orders in question were legally unsustainable. In view of the settled legal position on all the issues raised by the Revenue in these appeals, HIGH Court was of the view that no substantial question of law arises for determination. Revenue's Appeal was thus dismissed. A reassessment order cannot be passed without compliance with mandatory requirement of notice being issued by AO to assessee u/s 143(2). In support of the above, reliance is placed on the judgments of Hon'ble Supreme Court in the case of ACIT v. Hotel Blue Moon (2010) 321 ITR 362 (SC) in the said case, the Hon'ble Supreme Court observed as under (page 369) "Omission on the part of the assessing authority to issue notice under section 143(2) cannot be a procedural irregularity and the same is not curable and, therefore, the requirement of notice under section 143(2) cannot be dispensed with." Further the Hon'b....
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....e issue of notice. The provisions of section 292BB of the Act shall also not be applicable in the instant case as the assessee objected on the validity of the notice issued under section 143(2) of the Act. The AO has been defined u/s 2(7A) of the Act who is having jurisdiction over the assessee by virtue of the provisions of section 120 of the Act. In the instant case, the ld. CIT(A) has clearly observed the fact that at the time of return filing, the DCIT Central Circle XI was the jurisdictional Assessing Officer and on a later date the case was transferred to Ward 56(4) in pursuance of the order passed under section 127 of the Act. The findings of the ld. CIT(A) is reproduced below:- "3.3. The submission of the Ld. AR of the appellant have been considered in the light of materials brought on record and the case laws referred to. It appears form the record that the appellant firm had filed its return belatedly u/s. 139(4) of the Act, on 17/01/2009. The return was filed electronically with digital signature. At the time of filing return, the DCIT, Central Circle-XI, Kolkata was the jurisdictional Assessing Officer. Subsequently, the Ld. CIT, Crentral-1, Kolkata passed an o....